Arion Bank has issued bonds for a total of €300 million. Bids totaling in excess of €675 million from approximately 100 investors were received. The bonds are 3-year instruments with a fixed 3.125% coupon and were sold at a rate corresponding to a 3.10% premium over interbank rates. This represents the first issue by an Icelandic bank in euros to be sold to a broad group of investors since the financial crisis.
Last year Arion Bank arranged with Citi, Deutsche Bank and Nomura for roadshows to be held with European investors with the aim of issuing bonds in euros when the conditions on the market were right. The credit markets have been improving recently and following the Bank's strong annual financial results it was considered the right time for a bond issue of this size.
The aim is to use some of the proceeds to pay down other more expensive loans and thus reduce the Bank's funding costs. Corporate clients of the Bank in need of foreign funding will also benefit from improved access to international credit.
This bond issue is the logical next step in a targeted effort to diversify funding in recent years. In early 2013 Arion Bank issued bonds in Norwegian kroner and by doing so became the first Icelandic bank to raise foreign funding since 2007. At the beginning of 2014 the Bank was assigned a rating by the international ratings agency Standard & Poor’s, the first Icelandic bank to obtain a rating for more than five years. Later that year the outlook was upgraded from stable to positive. The credit rating from S&P is critical in this respect and greatly increases the number of potential investors in bonds issued by the Bank.
Höskuldur H. Ólafsson, CEO of Arion Bank:
“In recent years we have sought to diversify the Bank’s funding base and to gain better access to the international credit markets, and Arion Bank is leading the way in Iceland in this respect. This issue is the first major bond issue by an Icelandic bank to a broad group of international investors for many years. It is result of efforts made in recent years and represents an important milestone. This bond issue is not only important for us and our customers but also for the Icelandic economy as access to international credit at good terms is vital for continued growth."
For further information please contact Haraldur Gudni Eidsson of Arion Bank's Communications division at haraldur.eidsson@arionbanki.is, or tel. +354 444 7108.